CMHC Revises Alberta’s Real Estate Forecast Downwards

Canada Mortgage & Housing Corporation (CMHC) released an updated market outlook “reflecting the evolution of risks” since their last forecast in Q4 2014.

Price growth for Alberta’s real estate market was revised downwards from earlier, but the national housing agency still expects prices to increase in 2015 & 2016.

CMHC is predicting that the average residential resale price in the province will rise 1.6% in 2015 and then another 1.9% in 2016. Alberta sales are now projected to fall -0.9% this year before bouncing up 0.7% next year.

For Calgary CMA specifically, CMHC said prices would rise 1.8% from $460,584 in 2014 to $469,000 in 2015. Sales are expected to only fall -3.3% from 33,615 in 2014 to 32,500 this year.

To put it another way, CMHC is saying that there will only be 1115 fewer sales for the Calgary CMA this year compared to last. Calgary compiled over half that deficit in January alone which means CMHC is clearly betting on the market improving as the year progresses.

Unfortunately, CMHC doesn’t have the best track record for forecasting in a declining market. The following screenshot is from a post back in 2009:

2008 forecast gone wrong

Below are CMHC’s two most recent Alberta forecasts so you easily compare the revisions.

These guys are hilarious. By predicting house price increases next year, what they’re effectively saying is that they are somehow better at predicting the price of oil then every commodity trader on the planet – because none of them know, and say as much. Perhaps these geniuses (who can apparently predict the price of a volatile commodity 18 months out) should quit CMHC altogether and go trade oil futures on the nymex and make some real money.

Hi Everyone,
Don’t look at the price betting at this point. All these folks keep telling you crap all about real estate.
I believe this is best time to buy investment properties when interest rate 2.40%variable fixed 5 years and you have best time for bargaining. Specially when tons people in panic mode.
I am not talking about expensive properties. I am talking about any properties which you can buy less then 200k in good community especially condos. Do your home work and do best bargaining and don’t rush and do not listen realtor or anybody advice. Educate yourself and enjoy real estate market. Personally I bought few properties in last 10 days on awesome bargaining almost (15-20%). I will keep buying properties until low interest rate environment for at least next 4 to 5 years. I can easily make my down payment double in next 5 years with the help of tenant and low interest rate.
The best formula to buy properties
your rent and purchase price. Below example for condo tips
let say you bought property at 199k and rent it out for 1600 (condo fees around 385 per month)
1600×12 = 19200
192000/199000×100 = 9.6%
your rent should be over 9 percent according to this formula and you will never worry about what’s people forecasting about property.

Suleman, you can’t buy a condo that rents for 1600 for that price. Maybe 1000, tops. Your business plan is a fantasy.
And how do you get 9.6% again? Makes no sense. 19K per year rent, deduct almost 5K in condo fees, 1K is property tax, .5K in insurance. What do you get? And that’s with a 200K cash investment.Thats 12K based on an unrealistic rent oaf 1600. In reality you’d get 1K rent so you clear about 5K after condo fees, insurance and property tax. That’s 2.5% before income tax or repairs etc.

Every RE investment book will tell you that a monthly rent has to be 1-1.5% of property value.

I’m not sure how the CMHC could make such a dubious prediction given the realities of the current situation. This prediction is clearly misleading, and shows just how biased the CMHC crown corporation has become.

@Mike: Do you know if other western countries have similar governmental bodies like the CMHC?

–The FHA is a government agency that provides mortgage insurance in the US
-Mike Fotiou